Roth Post-Tax Contributions

The Roth feature means you can contribute post-tax dollars into the plan so you won’t have to pay taxes on these contributions when you take them out.

When you contribute to a traditional 401(k), you’re contributing on a pre-tax basis, meaning you get a tax break upfront but have to pay taxes when you take the money out in retirement. With a Roth account, you contribute post-tax dollars, and the money you contribute, including earnings (if you hold the account for at least five years and don’t withdraw the money until at least age 59½), comes out tax-free in retirement.

Who would want to take advantage of the Roth feature? You, if you:

  • Are in a lower tax bracket now than you expect to be when you retire, which might mean you pay less in taxes overall.
  • Are young and have decades of tax-free compounding earnings potential.
  • Plan to leave your Roth to a spouse or heirs who can stretch out the tax-free growth.

If you take advantage of the Roth feature, your post-tax contributions will go into a separate account, which is different than any pre-tax contributions you make.